VF Earnings Call Nuggets: Retail Inventory Levels and Winter Season Product Mix
Retail Inventory Levels
Robert Drbul – Barclays Capital: Eric, the two questions that I have, I guess, relate around the Outdoor business a little bit. When you look at the top line that you’ve driven especially The North Face versus the industry, it’s been pretty impressive and I was just wondering if you guys can comment around inventory levels at retail mainly around The North Face, but I would also be interested just to understand inventories of Timberland product and especially as it looks to the mid-single-digit growth rate for 2013 that you expect in Timberland?
Eric C. Wiseman – Chairman, President and CEO: Yeah, Bob, Steve will take that question for you.
Steve Rendle – VP and Group President, Outdoor & Action Sports Americas: Yeah, so, Bob, inventory in the channel, we really have two stories here. The TNF inventory is higher than we’ve seen historically. I think the good news is the last four, five weeks since December week five, cold weather has returned to much of the U.S. and we’ve seen really nice increases in retail sell-through. Timberland really came through fourth quarter in a much, much cleaner situation and enters this year with very clean inventories in all of their channels.
Robert K. Shearer – SVP and CFO: I mean what we’d also say there Bob is that in Europe inventories are probably a little cleaner than that; a little better shaped.
Steve Rendle – VP and Group President, Outdoor & Action Sports Americas: Yeah, a good point.
Winter Season Product Mix
Kate McShane – Citi: With regards to The North Face and maybe any potential changes that could be anticipated over the next couple of years, how should we think of product mix following throughout the winter season? Does it impact margins at all, and are you converting or changing your sourcing with regards to North Face in the near-term?
Steve Rendle – VP and Group President, Outdoor & Action Sports Americas: Kate, so I’ll take that one as well. The product mix stays very similar to what you’ve seen. In the European market, cold weather apparel continues to be very important, especially in the Northern region and some of the emerging markets. Here in the U.S. and as well as in Europe, we do see an increase in more contemporary athletic silhouettes which will, we believe, with our focus on the activity-based model and the learnings we have from our running training business, we’re well on the forefront of evolving our collections to meet that new consumer demand. We do see an increase in the lighter weight, what we call, transitional weight insulated goods that’s made of synthetic insulations, down insulations as well as fleeces and again, we’re well on the path of being on the front end of that trend. Margins in these categories remain the same. So, there really is no change there. And our sourcing model here in Asia as well as here in the Americas remains the same and is well placed to be able to service what we consider will be increasing demand.
Eric C. Wiseman – Chairman, President and CEO: Kate, I’ll add one thing to that. If you think about the short-term, the next 12 months for The North Face brand, our fastest growth rate will be in Asia followed by Europe and followed by the U.S. and other way to slice that is to say, our direct-to-consumer business is going to grow faster than our wholesale business. All of those facts point to higher margins for The North Face. The mix in geographies and the mix in channels should expand our gross and operating margins next year.
A Closer Look: VF Corporation Earnings Cheat Sheet>>